This is not technical advice and does not constitute investment advice.

1. Analysis of Core Price Increase Segments and Domestic Substitution Capability

1. Wafer Manufacturing (Value Share: Approximately 32%)

Price Increase Performance:

• Advanced processes lead the price increase: The price for 2nm processes has risen by over 50% compared to 3nm, while the price increase for 3nm processes is between 16% and 24%.
• Mature processes follow suit: Prices for nodes such as 55nm have increased by about 10%, with capacity utilization remaining high.

Core Company Characteristics:

• SMIC: The main player in domestic mature process foundry, with a capacity utilization rate of 92.5%.
• Huahong: Significant advantages in specialty process platforms, leading in power device foundry.
• China Resources Microelectronics: A leader in power semiconductor foundry, benefiting from demand for automotive-grade chips.

Domestic Substitution Capability and Potential: Mature processes have achieved large-scale production with strong substitution capability, with a localization rate exceeding 70% and a substitution space of approximately $8 billion; however, advanced processes (7nm and below) still heavily rely on TSMC, making substitution difficult.

2. Semiconductor Equipment (Value Share: Approximately 21%)

Price Increase Performance:

• Etching and thin film deposition equipment have seen extended delivery times due to strong demand from wafer fabs.

Core Company Characteristics:

• AMEC: Breakthroughs in etching equipment technology, entering TSMC’s advanced process supply chain.
• North Huachuang: A leader in platform-based equipment, with PVD equipment entering TSMC’s 2nm supply chain.
• Tuojing Technology: Leading in thin film deposition equipment, with a year-on-year revenue growth of 54.25%.

Domestic Substitution Capability and Potential: Moderate substitution capability has been achieved in etching, cleaning, and other equipment fields, with an etching equipment localization rate of about 35% and cleaning equipment over 45%, with an overall substitution space exceeding $15 billion; however, core equipment such as photolithography machines remains difficult to substitute.

3. Memory Chips (Value Share: Approximately 19%)

Price Increase Performance:

• DRAM wholesale prices have increased by 30% in a single quarter, with some models seeing increases of over 66% in six months.
• Explosive demand for HBM, with HBM2e products seeing an increase of 80% in six months.

Core Company Characteristics:

• Jiangbo Long: A leader in domestic memory modules, rapidly breaking into enterprise-level storage.
• GigaDevice: The first domestic niche DRAM provider with a complete product line.
• Beijing Junzheng: Leading in the automotive DRAM niche market.

Domestic Substitution Capability and Potential: Moderate substitution capability exists in niche DRAM and automotive storage segments, with a localization rate of about 40% for niche DRAM and over 35% for automotive storage, with an overall substitution space exceeding $20 billion; however, mainstream DRAM and NAND Flash are still dominated by international giants, making substitution difficult.

4. Semiconductor Wafers (Value Share: Approximately 15%)

Price Increase Performance:

• Prices for 8-inch automotive-grade high-purity wafers have increased by 25%-30%.
• Prices for 12-inch wafers are stable with a slight increase.

Core Company Characteristics:

• Shanghai Silicon Industry: A leader in domestic semiconductor wafers, with leading 12-inch technology.
• TCL Zhonghuan: Large-scale production of semiconductor wafers, with outstanding technical strength.
• Liang’an Micro: Full industry chain layout from wafers to power devices.

Domestic Substitution Capability and Potential: 12-inch large wafers have achieved technological breakthroughs, with moderate substitution capability; the localization rate for 8-inch wafers is about 50%, and for 12-inch wafers about 25%, with an overall substitution space of approximately $12 billion.

5. Packaging and Testing (Value Share: Approximately 8%)

Price Increase Performance:

• Prices for advanced packaging have increased by 15%-20%.
• Traditional packaging prices have also risen in tandem.

Core Company Characteristics:

• JCET: A leader in domestic packaging and testing, with comprehensive technological advantages.
• Tongfu Microelectronics: Breakthroughs in advanced packaging, with close cooperation with major clients.
• Jingfang Technology: Specializing in sensor packaging and testing, a leader in niche fields.

Domestic Substitution Capability and Potential: Traditional packaging and testing have strong substitution capabilities, with a localization rate exceeding 60%, and sensor packaging and testing around 70%, with an overall substitution space of approximately $8 billion; however, advanced packaging technology remains difficult to substitute.

6. Third-Generation Semiconductors (Value Share: Approximately 5%)

Price Increase Performance:

• Prices for GaN devices are stable with slight increases, while the price of upstream gallium has risen by 500% over five years.
• Prices for automotive-grade silicon carbide modules have stabilized structurally.

Core Company Characteristics:

• San’an Optoelectronics: Yield for GaN RF chips has improved to 85%.
• Tianyue Advanced: Leading in silicon carbide substrate technology.
• Lanxiao Technology: A leader in gallium extraction technology.

Domestic Substitution Capability and Potential: Moderate substitution capability exists in fast charging and RF applications, with a localization rate exceeding 50% in fast charging, about 30% for RF GaN, and an overall substitution space of approximately $15 billion; however, high-end automotive applications remain difficult to substitute.

2. Prospects for Domestic Substitution and Investment Value Analysis

Substitution Capability Layers are Clearly Defined

Achieved large-scale substitution (localization rate > 50%):

• Mature process wafer manufacturing, traditional packaging and testing.
• 8-inch wafers, fast-charging GaN devices, sensor packaging and testing.
• Substitution space: Approximately $28 billion.

Rapid breakthroughs (localization rate 20%-50%):

• Semiconductor equipment (etching, cleaning, thin film deposition).
• Memory chips (niche DRAM, automotive storage).
• 12-inch wafers, RF GaN, SiC substrates.
• Substitution space: Approximately $62 billion.

Long-term challenges (localization rate < 20%):

• Advanced process manufacturing, core equipment such as photolithography machines.
• Mainstream memory chips, advanced packaging.
• EDA/IP, high-end automotive chips.
• Substitution space: Approximately $90 billion.

Investment Value and Risk Balance

High certainty opportunities (localization rate > 50%):

• Mature process foundry (SMIC, Huahong).
• Traditional packaging and testing (JCET, Tongfu Microelectronics).
• Power semiconductors (China Resources Microelectronics, Sinda Semiconductor).

High growth opportunities (localization rate 20%-50%):

• Semiconductor equipment (AMEC, North Huachuang).
• Silicon wafer materials (Shanghai Silicon Industry, TCL Zhonghuan).
• Third-generation semiconductors (San’an Optoelectronics, Tianyue Advanced).

Long-term layout areas (localization rate < 20%):

• Advanced process-related equipment materials.
• Core software such as computational lithography.
• High-end automotive chips.

3. Conclusion

In this round of semiconductor industry transformation, the price increase wave and domestic substitution form a dual driving force:

Short-term focus on price increases: Concentrate on supply-demand tight segments such as mature processes, memory chips, and semiconductor materials.

Long-term focus on substitution: Pay attention to companies achieving technological breakthroughs in key areas such as equipment, materials, and third-generation semiconductors.

Focus on:

• In areas where substitution has been achieved (localization rate > 50%), choose leading companies with strong large-scale production capabilities.
• In areas that are breaking through (localization rate 20%-50%), choose growth companies that have passed technical validation and are on the verge of ramping up production.
• In areas facing long-term challenges (localization rate < 20%), pay attention to core companies supported by national funds.

Overall judgment: The Chinese semiconductor industry is steadily advancing domestic substitution along a path from easy to difficult, from low to high. In mature processes, specialty processes, and some equipment and materials fields, strong domestic substitution capabilities have already been established, effectively filling about 60% of domestic market demand. Although there are still significant challenges in the most advanced fields, the continuous improvement of localization rates brings certain growth opportunities to the industry chain.